Tag: finance

Submitted by Mike Krieger via Liberty Blitzkrieg blog,

A little over two years ago, many of us, including myself, were expecting a bitcoin price resurgence back to the prior highs. On the other side of the fence was Vinny Lingham, a serial entrepreneur who also happened to be intimately involved in the space. His alternative view centered around an expectation that the bitcoin price would remain weak for quite some time before ultimately heading back up to new highs. I highlighted his thoughtful perspective in the post, Guest Post: Why is the Bitcoin Price So Weak? 

I’ve been eagerly waiting for Vinny’s next installment, which he finally published last week under the title, Bitcoin 2016?— “There has been an awakening…” Let’s just say he’s turned pretty bullish.

So without further ado, let’s examine the words of the man who’s forecast back in 2014, proved so extraordinarily prescient.

When Vinny speaks about Bitcoin, I listen, and so should you. Well done once again, sir.

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With the Trump vs Clinton showdown set to begin and conclude precisely 6 months from today, the market is finally starting to focus on how either of the two presidential contenders will impact various asset classes. In this vein, over the weekend, Deutsche Bank’s Alan Ruskin issued a report on how FX trading will be influenced by politics, noting that the channels through which the coming election will influence the USD are complex and sometimes contradictory – which will probably mute the response to some degree. Assuming Trump and Clinton are the candidates, here are some broad FX considerations.

1. Fed policy:

Given Trump’s comments, Yellen’s term will not be extended beyond January 2018 under a Trump Presidency. In any event, Yellen may choose to leave after her term ends under a Clinton Presidency, so some change in approach is possible regardless of who wins. Given Yellen is regarded as on the dovish end of the policy spectrum, this consideration could play USD positive, but it is too soon to be a major factor.

2. Fiscal policy:

On fiscal policy, there is a significant probability of some fiscal stimulus early into the new President’s term, whoever is President, even with a divisive Congressional backdrop. The last three Presidents all pursued some form of fiscal stimulus at the start of their first term under varying circumstances. Increased infrastructure investment seems to be a common theme in the Trump and Clinton proposals, and has some cross party support. The fiscal-monetary policy mix is then apt to be more USD friendly post-election. This is much more relevant for thinking about 2017 than 2016.

Before then, assuming the race is reasonably tight, we will be worrying about trade disputes, and a US-led increase in global risk.

3. Trade:

These stresses have predictable FX consequences in some areas – the MXN is very vulnerable – but are less predictable in terms of impact for other currencies, including for EM Asia and CNY. EM Asia will be subject to negative trade concerns, but particularly for those countries that are intervening to stop appreciation they will be under more pressure to let their currencies appreciate. All countries on the US Treasury monitoring list spring to mind, with Taiwan and Korea in EM Asia in the spotlight based on C/A surpluses and intervention patterns. Presumably, under Trump, the US Treasury monitoring mechanism will be applied with a heavier hand. This on the surface should be good for the KRW and TWD. However, watch-out for an unpredictable China impact that could dominate all other factors. Pushing China to tolerate a more market determined exchange rate, will likely lead to a weaker CNY with negative implications for all of EM Asia FX.

How any Trump administration navigates this ‘contradiction’ between a country running a large bilateral surplus with the US, but market pressure for their currency to weaken, will be crucial. If Trump’s negotiations with China roil markets, the dominant macro story will quickly shift to a China led risk-off move, with very negative consequences for all commodity and EM FX, with the USD strengthening against most currencies, outside the other G4 currencies. A US led increase in global uncertainty would undercut the Fed policy tightening cycle, and act as a USD negative factor versus the likes of JPY, CHF, and EUR.

4. Key appointments:

Who Trump and Clinton lean towards as Treasury Secretary is very important. The unspoken flip side of comments that countries are manipulating their currencies weaker, is that the USD is too strong. The last time the US went down the path of using the exchange rate as a trade tool was with Treasury Secretary Lloyd Bentsen in the first couple of years of the Bill Clinton administration – a period when the US was constantly talking USD/JPY lower. Any sign that we are going down that path could put the USD under some pressure versus a few select currencies, including the yen. Trump would further close the exchange rate as one key channel through which unorthodox policy works, potentially compounding concerns about unorthodox policy efficacy, with negative risk implications.

5. Other:

However, even here pre-election USD negative implications of the trade discussion, will be partly offset by the USD positive post-election thinking on the monetary/fiscal mix, and other USD positive micro issues like a 2005 HIA equivalent repatriation of US corporate tax holdings from abroad (even if most these assets are in USD already). Considerations of a possibly more ‘business friendly’ administration could also be an important USD positive, but again as a 2017 theme.

6. Conclusions:

As the election debate heats up, this should play EMFX and commodity currency negative versus G3. To the extent that US politics is seen  leading to a rise in global uncertainties, this should be mildly USD negative versus the JPY, CHF and EUR into the election, but the fiscal-monetary policy mix thereafter could encourage the resumption of the stronger USD theme in 2017. The wild-card in the longer-term 2017 calculus for G3, is the extent to which trade negotiations roil China’s markets, which would add negative pressure to EM and commodity currencies, while the EUR and JPY would likely hold their own versus the USD.

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Following modest strength in Middle East stocks…

 

It appears the Sunday night algos are currently positive on a new Saudi Oil Minister. June WTI crude has run Friday’s highs stops and pushed up around 2.5% at the open on decent volume…

 

 

One wonders what happens when $46 or the Thursday highs are taken out…

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Submitted by Claire Bernish via TheAntiMedia.org,

Saudi Arabia, the United States, and their allies have developed a nasty habit of “epidemic” proportions in various military theaters, particularly around the Middle East — bombing hospitals, healthcare facilities, and, in at least one instance, an ambulance. But despite countless pleas from humanitarian organization Médicins Sans Frontières (MSF, Doctors Without Borders), that bombing continues, so the United Nations was finally forced to issue its own resolution on the matter.

Resolution 2286, co-sponsored by 80 member nations, condemns attacks on medical personnel and facilities in conflict situations and demands “an end to impunity for those responsible and respect for international law on the part of all warring parties.”

Though it might seem superficially absurd to issue a condemnation for something so patently fundamental, evidence of its necessity remains unfortunately prevalent in headlines.

One egregious example came at the end of April in the conclusion of an investigation into the targeted bombing of an MSF hospital facility in Kunduz, Afghanistan, on October 3 of last year. Though 16 U.S. service members were found responsible for the attack, accountability in the form of punishment lacked the severity warranted for the deaths of 42 medical staff, patients, and civilians.

“The 16 found at fault include a two-star general, the crew of an Air Force AC-130 attack aircraft, and Army special forces personnel, according to U.S. officials who spoke on condition of anonymity to discuss the internal investigations” with the Los Angeles Times. “One officer was suspended from command and forced out of Afghanistan. The other 15 were given lesser punishments: Six were sent to counseling, seven were issued letters of reprimand, and two were ordered to retraining courses.”

It would be difficult, when taken with the magnitude of what actually took place in the Kunduz hospital attack, to classify such a punishment as even slaps on the wrists of those responsible.

“Many staff describe people being shot, most likely from the [AC-130] plane, as people tried to flee the main hospital building that was being hit with each airstrike,” MSF said in a statement following the bombing. “Some accounts mention shooting that appeared to follow the movement of people on the run.”

Though the official explanation from U.S. officials inexplicably characterizes the bombing as an ostensibly horrible mistake, details of the harrowing 90-minute siege stretch the veracity of such a claim beyond the limits of feasibility. Médicins Sans Frontières has in place numerous safety precautions to protect both staff and patients — particularly since the organization treats any injured parties, regardless of affiliation, in conflict areas — including a staunch prohibition on weapons in their facilities.

“A series of multiple, precise and sustained airstrikes targeted the main hospital building, leaving the rest of the buildings in the MSF compound comparatively untouched. This specific building of the hospital correlates exactly with the GPS coordinates provided to the parties of the conflict (GPS coordinates were taken directly in front of the main hospital building that was hit with the airstrikes).”

 

Absolving itself of responsibility for what has been widely deemed a war crime, the Pentagon’s official explanation significantly downplays the attack as “a combination of human errors, compounded by process and equipment failures,” and that “fatigue and high operational tempo also contributed” to what it calls the “fog of war.”

In actuality, no excuse exists for a targeted attack on a civilian structure which dually functions as a safe haven for those injured in an already relentless, violent military campaign — itself with questionable motives and practices. No whitewash strong enough exists to paint over an inexcusably egregious so-called error.

But the worst facet of the Pentagon’s self-declared impunity is that Kunduz isn’t the only healthcare facility bombed by the U.S. and its allies — and Afghanistan isn’t the sole location such an attack has been carried out. Not by far.

Between March and November 2015, the U.S.-backed coalition managed to bomb nearly 100 hospitals in war-ravaged Yemen — though with the media’s attention trained on the imbroglio raging in Syria, that report caused little more than a ripple. Echoing innumerable unanswered pleas by MSF, the International Committee of the Red Cross (ICRC) asserted the targeting of health facilities “represent a flagrant violation of international humanitarian law.”

“The neutrality of health care facilities and staff is not being respected,” contended deputy head of the ICRC delegation in Yemen, Kedir Awol Omar. “Health facilities are deliberately attacked and surgical and medical supplies are also being blocked from reaching hospitals in areas under siege.”

Apparently and typically, repeated calls to end targeted violence fell on deaf ears.

At the end of April, Al Quds Hospital in Aleppo fell under attack, killing 27 people — including three children and one of the decimated city’s last qualified pediatricians — and eliciting one of the most gut-wrenching open letters to date, courtesy of the director of the Aleppo Children’s Hospital.

“Like so many others,” wrote Dr. Hatem, “Dr. [Mohammad Waseem] Maaz was killed for saving lives. Today we remember Dr. Maaz’s humanity and his bravery. Please share his story so others may know what medics in Aleppo and across Syria are facing.

 

“The situation today is critical — Aleppo may soon come under siege. We need the world to be watching.”

 

Addressing the United Nations in utter frustration on Tuesday, MSF head, Joanne Liu, beseeched the members responsible to “Stop these attacks! You … must live up to your extraordinary responsibilities and set an example for all states.”

Though her sentiment may be broadly shared, the Pentagon’s less than lackluster response to the U.S. military members complicit in the Kunduz bombing make the likelihood of her demands being met exceedingly unlikely anytime soon.

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Does any of it make sense?

 

 

Source: Townhall.com

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Via TheFIRE.org,

In a stunning attack on freedom of association, Harvard University announced today that members of independent, single-sex, off-campus organizations will be blacklisted from Rhodes and Marshall scholarships and banned from leadership of on-campus organizations or athletic teams.

Harvard President Drew Gilpin Faust stated that next year, members of fraternities, sororities, and “final clubs” will begin to be denied these opportunities in an effort to foster “inclusion” and “address deeply rooted gender attitudes.”

 According to Dean Rakesh Khurana, who recommended the changes, such organizations have been independent from Harvard since 1984. They operate as off-campus entities and do not receive any recognition or benefit from the university.

“Outrageously, Harvard has decided that 2016 is the right time to revive the blacklist,” said Robert Shibley, executive director of the Foundation for Individual Rights in Education (FIRE), which defends freedom of association on campus.

 

“This year’s undesirables are members of off-campus clubs that don’t match Harvard’s political preferences. In the 1950s, perhaps Communists would have been excluded. I had hoped that universities were past the point of asking people, ‘Are you now, or have you ever been, a member of a group we don’t like?’ Sadly, they are not.”

“Harvard’s decision simply demonstrates that it is willing to sacrifice students’ basic freedom of association to the whims of whoever occupies the administrative suites today,” said FIRE co-founder, civil liberties attorney, and Harvard Law alumnus Harvey Silverglate.

“Who’s to say that Harvard’s leaders five years from now won’t decide that Catholics or Republicans should be blacklisted because they might not line up with Harvard’s preferred values?”

via http://ift.tt/1T5Ujf4 Tyler Durden

In a recent interview with CNBC’s Rick Santelli, Richard Fisher, former President of the Dallas Fed, explained “The Fed has the market on Ritalin—trying to keep the mood very smooth, keep volatility down as much as possible. As soon as they hint that they might remove that, then they create the problems they’re afraid of. So, they’ve boxed themselves into a corner, and the real art will be to see how they manoeuvre to get out of that”….“When [the Fed] move—and I hope they move sometime in June—there’ll be a settling in of the marketplace. There will be a correction. Suck it up. Deal with it. That’s reality.”

 

And, as Albert Edwards correctly notes, “the sad thing is that, as Fisher says, the Fed has boxed itself into a corner, for surely it is clear to all in the markets by now that it’s not “global risks” that worry the Fed but the impact on the S&P.”

And just in case it still isn’t clear, here is some Edwardsian sarcasm who points out that it is “definitely Global Risks that the Fed is concerned about… not the S&P” as the chart below “clearly shows.“

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Submitted by Danielle DiMartino Booth via DiMartinoBooth.com,

Following the Great War, indoor plumbing became without a doubt a Godsend for much of the world. However, few innovative leaps, including even the wonders of indoor plumbing, have ever been entirely free of at least a few drawbacks. Think of electricity and its dependence on any number of variables from lightbulbs to Mother Nature. Or the inevitability of those scratches that marred our favorite vinyl, or later CDs, rendering them unfit for the human ear. And, oh, the sparks that flew the first time we married metal with that fantastic new convenience, the microwave. The greatest innovative leap of our lifetimes started out easily enough with the personal computer. But even that technological disruptor has proven it too can be disastrously disruptive with nasty viruses, bugs and glitches working 24/7 to wreak havoc on our universal connectivity.

As for the wonders of indoor plumbing, its vulnerability rendered it anything but wondrous as it invited that inevitable bane to be borne, known worldwide as the dreaded backup. While no doubt it was a huge relief to no longer have to tiptoe into the night on an outhouse run or tow water to and fro for this and that, plumbing didn’t turn out to be exactly turn-key and stress-free. Anxieties soon arose from the prospect of that first call to the pricey plumber. Even in the 1920s, their service charge and hourly rate were bound to have given pause to the humble housewife. The beauty of the profitable plumber pariah was the subsequent innovation that followed, that of Drano, which was thankfully introduced in 1923.

Over that same 100 years, give or take a few, the financial system has also suffered its own bouts of clogged pipes though the culprits have tended to be a wee bit trickier to dislodge than gelatinous grease and hardened hairballs. Recall that in October 1979, Fed Chairman Paul Volcker formally announced that the monetary base would be the new and improved target to better control the price of credit. When overnight credit is priced perfectly, the funding spigots stay open just enough to keep credit flowing, but not flooding the financial system.

Volcker’s pivot away from the fed funds rate, however, proved more Pandora than panacea. And so three years later, in October 1982, policymakers re-adopted the targeting of the federal funds rate where policy technically remains to this day. An Econ 101 refresher: the fed funds (FF) rate is the interest rate at which depository institutions lend reserve balances to one another on an uncollateralized basis in the overnight market.

Fast forward to the here and now and all is well for the rate setting masters of the universe save one niggling detail: for all intents and purposes, the fed funds market no longer exists. Relatively new regulations have simply made redundant the FF market as it once was and no longer is.

As intrepid readers of these weeklies, you should certainly be aware of one Zoltan Pozsar and his 20 years of groundbreaking work. Today, the thorough brilliance of his work has catapulted him to the rank of world’s preeminent professional plumber, at least as far as the global financial system is concerned.

Pozsar’s ascendance began as many things do, innocuously enough when one day early in his career he was tasked with a particular objective — to contextualize the importance of collateralized mortgage obligations and special investment vehicles within an obviously inflating housing bubble.

Conjure up an image of Russell Crowe in A Beautiful Mind, without the schizophrenia. Now you have a good idea of the ‘aha’ moment Pozsar experienced as he began to connect the dots between the various working pieces that had for years held together the housing market. His peers at the New York Fed knew it was no secret that subprime securitization had opened up housing availability to millions of Americans. But the extent to which toxic mortgages could infect the entire global financial system had not been readily apparent until Pozsar fully diagrammed the plumbing on a three-by-four-foot map. Google it for your edification. You’ll be the wiser for it.

Since leaving the Fed, Pozsar has been conspicuously prolific in his productivity. While at the IMF, he managed to remap the post-crisis financial system (it now resembles a one-foot-thick atlas). He then moved on to Credit Suisse where he is today, educating financial market participants on the vastly changed regulatory regime that has, by the way, eradicated the fed funds market.

Pozsar opens his latest Global Money Notes piece by redefining understatement given the impetus to invent a new monetary mouse trap, so to speak: “2016 is shaping up to be an important year for the Federal Reserve.” Before the year comes to a close, the Fed will not only specify the intended size of its balance sheet but also the securities to be stored on it over the long haul. Spoiler alert: there’s no shrinkage in the offing.

At the nexus of the Fed’s perennially large balance sheet are two seemingly complex terms: the Liquidity Coverage Ratio (LCR) and High-Quality Liquid Assets (HQLA). Hopefully your eyes didn’t roll into the back of your head after being hit with not one, but two, acronyms because these particulars are, well, important for understanding what’s to become the new normal of U.S. central banking.

The Third Basel Accord, or Basel III as it’s become less than affectionately known among banks, was handed down by the Bank for International Settlements (the global central bank to central banks) in 2009. The intent was to reduce the risks in the banking system in the aftermath of a crisis that revealed banks were anything but safe and sound. It should come as no surprise that the subject of reserve requirements was smack in regulators’ crosshairs. By the end of 2019, if all goes according to plan, when Basel III is scheduled to be fully implemented, the capital reserves that banks worldwide must hold against losses will have trebled.

Enter the LCR, which is effectively a global reserve requirement mandated by Basel III. For U.S.-based banks, the focus is on the ‘L’ in the LCR, as in liquid. Regulators prefer reserves over bonds to meet minimum capital requirements. From stage right then enters HQLA, which is the Fed’s baby and emphasizes that the quality of liquid assets held be high, as in pristine. The combination of these two regulations translates into banks having to hold loads more in reserves than they once did and that those reserves be of the highest quality.

“In the post Basel III world order, base liquidity (reserves) will inevitably have to replace market-based liquidity,” Pozsar explains. “This in turn means there are no excess reserves – every penny is needed by banks for LCR compliance. And this also means that the Fed has only limited ability to shrink its portfolio.”

Where does the fed funds rate fit into the picture? As mentioned above – it doesn’t.

Banks would never choose to hold their liquidity buffers in unsecured interbank markets as they would be penalized (the fed funds market is unsecured). Rather, they will be compelled to use the secured repo markets, backed by Treasury collateral, or by accumulating reserves directly at the Fed.

“Excess reserves are not sloshing but rather sitting at the Fed,” Pozsar continues. “They sit passive and inert because banks must hold these reserves as HQLA to meet LCR requirements. You have to fund what you hold and since HQLA cannot be encumbered, you can only fund them unsecured. And banks always attempt to fund assets with positive carry.”

That last part refers to the fact that banks get paid interest by the Fed for reserves they have parked there

Does all of this mean that the Fed will be forced to shirk its role as directive general of the price of credit? Of course not. But the fact is, it can’t just leave the fed funds rate swinging in the wind; the FF has yet to be replaced as the means by which to price a full array of contracts in the financial markets. Lest ye worry, a committee mandated with replacing said FF rate has been actively pursuing an ideal replacement thereof since January of last year. Of course it has an important name! It is none other than the Alternative Reference Rate Committee.

Presumably this esteemed group is working furiously to devise a new overnight bank funding rate (last acronym, promise – OBFR), which Pozsar says is a “necessity, not a choice” given the disappearance of the FF market. The new OBFR will not be interbank, as is the case with the FF rate, but rather a customer-to-bank target rate that’s a global dollar target rate rather than just an onshore dollar funding rate. It will be as if the Fed was targeting LIBOR today.

“What this means for the Fed’s reaction function isn’t clear,” Pozsar concludes. “But our instinct tells us that we will deal with a Fed inherently more sensitive to global financial conditions, inherently more sensitive to global growth and inherently more dovish than in the past…”

Far be it from yours truly to worry. Still, it’s hard to take comfort in the knowledge that the Drano we’ve all come to know, though maybe not love, is now off the market. Less comforting yet is the fact that the plumber among financial market plumbers managed to end his forecast for the future with an ellipsis. He may as well as have ended with, “Better the devil you know…”

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In his latest must read presentation, Citigroup’s Matt King continues to expose – and be very concerned by – the increasing helplessness (and cluelessness) of central bankers, something this website has done since 2009, fully aware how it all ends.

Take Matt King’s September 2015 piece in which he warned that one of the most serious problems facing the world is that we may have hit its debt ceiling beyond which any debt creation is merely pushing on a string leading to slower growth and further deflation.

Or his more recent report which explained why despite aggressive easing by the BOJ and ECB, asset prices continue to fall as a result of quantitative tightening by EM reserve managers and China, which are soaking up the same liquidity injected by DM central banks.

Or his February 2016 report, in which his bearishness was practically oozing from every page, and which started off with the stunned observation, that “none of this is “supposed” to be happening” – inflation and economic growth are supposed to be rising in a world as manipulated by central bankers as this one. Instead, the opposite is taking place.” He then went on to say that “maybe it will all fizzle by itself”… “but if it doesn’t, then we have a problem.”

It wasn’t just one problem: as we laid out it was at least 8 problems, of which the last one was the most dire one: “if there is a next phase, it’s likely a crisis of confidence in central banks.” Because if central bank confidence goes away, so do the asset price gains of the past 7 years, all of which have been on the back of an unprecedented push by central banks to preserve the system if only that much longer.

Sure enough, central banks appear to have heard his ominous warning, and starting with the January Shanghai Accord, and the concurrent Beijing debt firehose which unleashed $1 trillion in debt in the first quarter, managed to stabilize if not the world, then certainly stock markets for a few months, courtesy of another epic credit-impulse driven push.

* * *

Over the weekend, King released his latest must read presentation, dubbed aptly enough “When the wisdom of crowds becomes the blundering herd”, in which he no longer laments the failure of central planning – we assume it’s taken for granted – and instead proceeds to highlight some of the direct consequences of living in a world in which extreme events are becoming increasingly more common, in everything from elections and polls (for which Trump is especially grateful)…

 

… to historic polarization in politics…

 

… to polarization in geography…

 

… even to polarization in weather…

 

… and of course, record polarization in the economy…

… in wealth and income…

 

… and markets…

 

… King then goes on to show just how senseless is any attempt to centrally-plan complex systems… 

 

… in which the longer central planners push the world away from an equilibrium point…

 

… pushing the system into a state of increasing fragility, defined by homogeneity, extensive interconnection, critical linkages, and slow, violent feedback…

 

… the more violent the snapback will be, and the greater the probability of breaching the critical tipping point beyond which the world will devolve into full blown systemic chaos, from which there is no return even with full central bank intervention.

Matt King’s question is also the $64 quadrillion one: “at what point does behavior become nonlinear?”

Neither we, nor King knows the answer – Janet Yellen most certainly does not – but looking at the gallery of unprecedented swings from one extreme to another, and of record divergences, we can’t help but think that we are very close, which is also why King is worried.

* * *

So until that one critical moment, in which central banks finally do push the world’s “complex system” beyond the tipping point of no recovery, here are Citi’s views on how to live, adapt and what to expect in world in which extreme events are now the norm, and in which complex systems have been hijacked by central planners.

First, the implications for politics: Direct democracy + disaffected populations = increased chance of extreme outcomes, as seen in election outcomes both in Europe and the US over the past year.

 

Then, the implication for profits, where it is increasingly a “winner takes all” outcome, especially if the winner has access to zero-cost debt with which to fund an expansive, monopolistic rollup.

The implication for jobs is well-known to regular ZH readers: “only the wealthy benefit from wage growth.” Now, even Citi admits it. To all other workers, better luck next time.

 

Then the one thing that nobody in power ever dares to mention: that near-record debt (the only time total US debt was higher as a % of GDP was just before World War II), merely amplifies the cycle and adds to the probability of tipping points.

 

Meanwhile, with defaults set to soar coupled with tumbling recovery rates, this means that whoever is on the hook will suffer massive losses now that the default outlook is even more binary than usual.

* * *

Finally, the two most important observations for market participants: market liquidity continues to deteriorate as a result of leverage constraints which imply lower diversity, and which together with central banks buying up increasingly more debt and equity securities, it means ever greater clustering of volatility, leading to periods of extremely low volatility punctuated by the occasional session of historic vol which forces exchanges to shut down the very measurement of the VIX as happened on August 24, 2015.

 

And then, finally, the implication for market levels is the most ominous: with the leverage cycle near – and in some cases beyond – its tipping point, equities are increasingly jittery as shown in the chart on the right.

 

Citi’s conclusion: the world is now much closer to a tipping point that what is implied by rates, which in turn merely represent what central banks want them to represent, which as we have said over many years, has nothing to do with the underlying reality.

In summary:

Extreme events are becoming more common, which is an intrinsic feature – not external shock – in a system that is fast approaching its “centrally-planned” tipping point. Citi’s suggestion: position for tipping points, and stay away from the conventional, fake optimistic forecasts that all shall be well as propagated by the financial media. This is why Citi is now very worried.

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Submitted by Richard Sisk via Military.com,

A small team of U.S. troops was on the ground in Yemen and Navy ships with Marines aboard were offshore to support friendly forces against an al-Qaeda offshoot as the U.S. deepened its involvement in yet another Mideast civil war, the Pentagon said Friday.

Capt. Jeff Davis, a Pentagon spokesman, declined to say how many U.S. troops were in Yemen near the port city of Mukalla, a former stronghold of the al-Qaeda in the Arabian Peninsula terror group, or whether they were Special Forces.

Davis said it was a "very small team" that had been sent into Yemen two weeks ago and was expected to be withdrawn soon. "We view this as short term," he said.

In addition, the U.S. has been conducting anti-terror airstrikes in Yemen against the terror organization apart from the effort to assist local forces on the ground, Davis said. Four airstrikes since April 23 had killed an estimated 10 fighters, he said.

The amphibious assault ship USS Boxer, lead ship for an amphibious ready group with Marines from the 13th Marine Expeditionary Unit aboard, and two Arleigh Burke-class guided missile destroyers, the USS Gravely and the USS Gonzalez, were also positioned off Mukalla, Davis said.

The troops on the ground and the ships offshore together were providing "airborne intelligence, surveillance and reconnaissance, advice and assistance with operational planning, maritime interdiction and security operations, medical support and aerial refueling," Davis said.

At a Pentagon briefing, the spokesman was vague on the mission of the troops but stressed that they were not advising and assisting friendly forces much like similar teams embedded in Iraq and Syria.

After some back and forth with reporters on the semantics of how to characterize the troops, Davis said it was appropriate to call them an "intelligence support team. We have a small number of people who have been providing intelligence support."

Davis said that the U.S. troops were supporting forces of the United Arab Emirates, but in a sign of the complexity of Yemen's civil war, forces of Yemen's embattled government and troops from Saudi Arabia were also involved in the drive to oust al-Qaeda in the Arabian Peninsula from Mukalla.

The Saudi Embassy in Washington said in a statement "Saudi forces are also on the ground alongside the UAE forces in Mukalla and that it is a Saudi-led Arab Coalition that is fighting AQAP alongside the U.S. military contingent on the ground."

The U.S. National Counter-Terrorism Center has described the terror group as "a Sunni extremist group based in Yemen that has orchestrated numerous high-profile attacks" against the U.S. It was the organization that sent Nigerian-born Umar Farouk Abdulmutallab on a Northwest Airlines flight over Detroit on Christmas day 2009 to detonate explosives in his pants but other passengers foiled the attack.

The group's most prominent operative was the charismatic Anwar al-Awlaki, a dual U.S. and Yemeni citizen, who communicated with Army Maj. Nidal Hasan prior to Hasan's shooting rampage at Fort Hood, Texas, in 2009, killing 13 people. Al-Awlaki was killed by a U.S. drone strike in Yemen in September 2011.

Davis said that the organization remained fixated on attacking the U.S. "This is of great interest to us. It does not serve our interests to have a terrorist organization in charge of a port city, and so we are assisting in that," he said.

Davis said the U.S. involvement was specifically aimed at "at routing AQAP from Mukalla, and that has largely occurred," suggesting that the ships and troops would quickly be withdrawn.

*  *  *

Yemen's civil war has killed more than 6,200 people, displaced more than 2.5 million and caused a humanitarian catastrophe in one of the world's poorest countries, according to the United Nations and human rights groups.

The war began in March 2015 when Houthi rebels, members of the Shia Zaydi sect and backed by Iran, overran the capital of Sanaa, forcing the government of Abd Rabbo Mansour Hadi to flee. A month later, al-Qaeda in the Arabian Peninsula took over Mukalla.

Saudi Arabia then came to the aid of Hadi, forming a coalition of Arab states including Bahrain, Qatar, Kuwait, United Arab Emirates, Egypt, Jordan, Morocco, Senegal and Sudan.

 

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